Thursday, September 15, 2016

HydroVille...Can Those IPP Contracts Be Canned?

InAndOut
CronyTown


In the wake of Norm Farrell's excellent Tyee piece on Hydro and his follow-up visit with Jon McComb on CKNW, we've had a bit of discussion around here about whether or not we can dump those most egregious IPP contracts that are costing us billions.

As a result, a sharp Anon-O-Mouse had this to say:

...Yes the "throwing out of signed contracts" can easily be done, as was done then. Indeed the use of "orders in council" to remove what can be deemed as unreasonable or questionable contracts, in terms of taxpayers ability to fund and or pay for them, could be used. The legal ramifications? Not many, if at all. While the bluff factor may be employed by the IPP's, I believe the risk they took initially, probably takes this into account...



A most interesting POV don't you think?


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12 comments:

Lew said...

Difficult to say what liability would arise from cancelling contracts, because BC Hydro keeps them secret and the paying public has no ability to analyze the termination clauses and potential ramifications. No doubt it could be done; but the risk and cost-benefit analysis is impossible without examining the contracts. Won’t happen until and unless the BC Liberals are shown the door.

BC Hydro has cancelled some in the past, but apparently had non-performance and/or minimal start-up costs to deal with on those. Wouldn’t doubt the performance review included a look at the campaign donation record and potential for each.

http://www.cbc.ca/news/canada/british-columbia/bc-hydro-to-cut-10-power-deals-defer-9-1.1375278

Anonymous said...

The argument of the (in)ability of taxpayers to pay was used very effectively by the Liberals to strip away teachers' bargained rights by tearing up contracts.

So there are precedents. And have a look at the Alberta PPA where certain energy companies have walked away from their power purchase agreements.

Lew said...

Anon@8:58,

Some might call the government’s excuse for tearing up of contracts to strip away teachers’ rights a very effective argument. I’m not among them.

I would remind you that the “very effective argument” the BC Liberal government used in 2002 is still winding its way through the courts and by the time the Supreme Court of Canada rules on the latest appeal it will be 15 years of very expensive court proceedings for both sides and there still may be a very substantial cost to BC taxpayers for the actions of the BC Liberals and Christy Clark specifically in that debacle.

As for the Alberta situation you cite, it is the producers trying to walk away from their contracts, and again it will be up to the courts to decide whether they have that ability, based in large part on the terms of the contractual obligations of each party.

Beyond saying it is possible to terminate the existing IPP contracts with BC Hydro, it is pure folly to say it makes financial sense until the actual resultant liability is fully understood. We do not, and cannot understand that until at a bare minimum we have access to the information that would be revealed by the existing contracts and reliable market projections. We currently don’t have that information.

Lulymay said...

David Climenhaga at albertapolitics.ca has an interesting article posted in July 2016 on something that might be similar to our home grown IPP problem here in BC. Look for: "NDP moves to end secret Klein-era scheme to offload corporate losses on the public".

motorcycleguy said...

I agree with Lew, we simply don't have the information. That would be information on how much of the resources that you and I own are being sold to who and for how long, never mind for how much. Below is a reply I made to a similar question on the comment thread for Mr. Farrell's Tyee article. I do believe there are a lot of projects that could be stopped in their tracks with justifiable cause. When an initial application is done in 2008 and the project has still not started real construction, something stinky in Denmark.

"With older IPPs with contracts about to renew, the deal should be: "We'll pay you the market rate, or you can just shut 'er down."

Ha, nevermind older IPP's up for renewal....Bennett and Polak are rubber stamping environmental certificates for new ones all the time.....the Narrows Inlet alpine lake draining project on the Sunshine Coast hasn't even started major construction yet...and there is no way they will meet the original Energy Purchase Agreement scheduled operating date specified in their contract. So much money is to be made by out of province pension funds and out of province private companies that they will gladly pay any late penalties. Plenty of valid reason to put the kibosh on it right now, if only Bennett knew how to use his calculator. The Sunshine Coast Regional District has already heard preliminary plans for 13 more IPP's on Jervis Inlet/Desolation Sound. Their track record of rubber stamping IPP's is on par with Bennett and Polak. Financial wizards my a##.

Anonymous said...

Lulymay @ 10:49 am. points to David Climenhaga at albertapolitics.ca

Here are 2 of DC's articles:
http://albertapolitics.ca/2016/07/ndp-moves-end-secret-klein-era-scheme-offload-corporate-losses-public-opposition-predictably-screams/

http://albertapolitics.ca/2016/08/dispatch-road-enron-power-boys-played-ralph-kleins-government-suckers/

John Brennand said...

What leaps to mind for me is the implications of the various 'Free Trade' agreements and the Investor State Dispute Settlement (ISDS) clauses there in. While the precedence of the Alberta Power Purchase Agreements may make it look simple, these corporations to walk away from agreements where THEY lose money. The existence of the ISDS handcuffs is a system that compels government, at any level, to compensate corporations from losing money because of choices made in the best interests of Canadians.
So called free trade is primarily designed to guarantee that, as far as multinational corporations are concerned, it's a case of "Heads, we win. Tails, you lose."

RossK said...

John B--

Which is exactly what the IPP contracts are, on steroids times about 50 billion...

Agree with Lew and others, though, that it is impossible to really know what is possible based on what the true liabilities are until we actually see the specifics of the actual deals.

Of course, this is very likely precisely why we haven't seen them.

The details, I mean.

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Anonymous said...

Lew @ 10:16

I thought you are taking things a little too seriously. My point was that the argument "based on the ability of the taxpayer to pay" justified the tearing up of contracts. Whether the SCOC will uphold that argument is another matter. So I was just trying to be funny...

As for the Alberta PPA case, you need to check your facts. In reality, it was the buyers, not the producers, who walked away. And if they prevail in court, it will be the Alberta taxpayer left holding the bag...which is already the case where BC taxpayers are holding the bag already.

Whether Hydro can legitimately walk away from the IPP deals is one thing. But at least, the fact that the IPP's were relieved of market risk at the expense of taxpayers should be continued to be stressed. That is the issue.

Lew said...

Anon@7:27

The arrangement in Alberta, where the "buyers" (middlemen) purchase power from producers and resell it to consumers effectively makes the middlemen producers as far as the paying public is concerned. They are trying to walk away from their contracts early due to market conditions and the government is suing to prevent that from happening and transferring the losses to the public through the balancing pool.

You are correct that in this province BC Hydro buys from the producer (IPP), loses money on the purchase, and transfers the loss to us. The government, rather than taking action to prevent this happening, actively promotes it while legislating a plan to hide the real cost to us and defer it to the future.

Sorry for not recognizing you had your tongue in cheek on the ability to pay rationale. That whole scenario disgusts me so much I have trouble seeing any humour in it, no matter how well intentioned.

cfvua said...

A different government could stop forcing BC HYDRO from borrowing money it pays the IPP schemers likely with little or no public backlash. As the IPP folks are all bona fide free enterprisers, they shouldn't be fearful of not having the provincially owned utility backstop any losses. And after all who wants to sell to a customer that has no money? Their big worry should be the same as the Premier's. Who will we sell our expensive power to? Any jurisdiction with acces to natural gas(other than BC) is using it to economically produce power at the load. The Premier in trying to build Site C will have BC residents paying the highest rates anywhere. Then of course if she is re-elected she just keeps on building debt to pay IPPs. In my business career I was always happy not to have to attempt to collect from a bankrupt customer.
After the windfall they have received from the current government some of the IPP types would likely see the writing on the wall and walk away. Gets them out of any cleanup liabilities as well. And as cleanup time draws near, a too broke to cleanup strategy will be forefront in the minds of these operators who can look to mining/oil and gas for examples of how that is done.

Anonymous said...

What happens if B.C. Hydro becomes insolvent?

The current government seems to be taking this debt ridden utility down the same road as hydro one in Ontario, to privatization. Would those contracts still hold up, if the utility goes bankrupt?